The European Commission has decided to back down from a plan to impose sanctions on the United States as a punishment for high tariffs on steel imports.

The US imposed extra duties of up to 30% on foreign steel imports in March, saying they were unfairly subsidised.

It was pointless to continue with it

Gordon Moffatt, Eurofer spokesman

The move sparked a global trade dispute as the EU, Japan and other countries filed complaints at the World Trade Organisation (WTO).

The EU's executive body has now decided against going ahead with a list of potential sanctions worth more than $300m "at this stage", and will recommend a delay to the meeting of EU foreign ministers on Monday.

European trade commissioner Pascal Lamy will tell ministers it is better to wait until March, when a WTO panel is expected to rule the US steel duties illegal.

That would give the EU a clear legal right to apply further sanctions to US goods.

"Our strategy of not applying sanctions and of pushing the US to grant
exemptions to our steelmakers has been successful," Mr Lamy's spokeswoman said.

US retreats too

The Commission had given itself until the end of September to decide whether to slap on sanctions ahead of the WTO hearing.

It will push ahead with a request to the WTO to punish the US, though it will have to wait until next year for the complaint hearing.

Since the US imposed the tariffs in March, it has exempted many types of steel from the net in a bid to head off a full blown trade war.

Nearly one quarter of imports covered by the original order are now exempt from the tariffs.

The EU's sanctions have become "a bit superseded by the exemption process," said Gordon Moffatt, a spokesman for European steel producers body Eurofer.

"It was pointless to continue with it," he said.

The US has welcomed the reports of the EU's retreat.

"We're pleased to hear the Europeans are stepping back from threats of retaliation," a spokesman for US Trade Representative Robert Zoellick told Reuters.

Sabre rattling

"As we've always said, our steel safeguards are in accordance with WTO rules. If others disagree,
the proper place to settle disputes is through the WTO... not unilateral retaliation," he said.

The Commission's stance is expected to ratified by a meeting of a EU foreign ministers on 30 September.

The Commission's report still contains fighting talk and appears to take some credit for the US' decision to reduce the scope of tariffs.

"Adequate pressure should be kept on the US to reduce further the negative trade impact of its safeguard action by way of additional product exclusions," it says.

The proposed list of sanctions was criticised by European firms whose goods appeared on it.